2 September 2019 Weekly Analysis
GCMAsia Weekly Report: September 2 – 6
Market Review (Forex): August 26 – 30
US dollar was traded lower last Friday due to bearish data from the region. The dollar index closed last Friday market at 98.70 as of writing.
According to University of Michigan, its Consumer Sentiment Index for the month of August came in lower at only 89.8, missing economist forecast of 92.3. It is the lowest reading since October 2016, which plunged due to ongoing trade dispute in between US and China. Ongoing trade dispute which involves a series of tariffs and business restrictions has creep into consumer sentiment, which in return may lead to lower spending in the near term if it persists.
However, overall losses on the US dollar were seemingly limited as market participants compares the currency to other fundamentals in the global market. Greenback’s appeal seems to be higher when compared to currencies such as Pound Sterling and Euro which both may be facing an imminent “hard Brexit” scenario which may cause a short-term economic turmoil due to the absence of a substantial trade deal.
Likewise, market participants is also digesting a rather bullish comment delivered by one of the member of the Federal Reserve. Prior, San Francisco Fed President Mary Daly commented that they will adopt a “wait and see” approach with regards to monetary policy as current US economy is still well positioned. However, Daly reiterates that ongoing uncertainties in the market may warrant for a short-term rate cut, well in line with Fed’s previous decision to make a 25-basis cut last month.
USD/JPY
Pair of USD/JPY continues to trade within a tight range for last week while closing Friday’s market at 106.25. Although recent trade dispute in between US and China continues to escalate, traders seemingly has digested the news while currently waiting for more signals from the market. Likewise, they will also scrutinize on upcoming major data from the US in order to gauge the likelihood of the next rate cut from the Federal Reserve.
EUR/USD
Pair of EUR/USD falters below 1.10 mark for the first time since May 2017 due to bearish sentiment towards the currency. The pair closed Friday market at 1.0989. Earlier on Friday, EU Consumer Price Index came in unchanged at 0.9%, fell short of market expectation of a 1% rise. With prospects towards more stimulus and probable rate cut from the European Central Bank, traders began to shift their portfolio to other assets in the market.
GBP/USD
GBP/USD extended its losses on Friday while closing the market at around 1.2161. Pound sterling remains under substantial bearish pressure following UK PM Boris Johnson decision to shut down the Parliament until 14th October in order to curb any retaliation against the likelihood of a hard Brexit. With the lack of meaningful progression in between UK and EU while coupled with political turmoil in Britain, investors shifted their portfolio into safe-haven assets such as gold and Japanese yen.
Market Review (Commodities): August 26 – 30
GOLD
Gold continues to notch higher while closing Friday’s market at $1,520.31 a troy ounce. With ongoing trade dispute in between US and China while coupled with Brexit risks in the UK and EU region, investors shifted their portfolio into the safe-haven assets in order to safe guard their capital. However, gains were limited as market participants waits for more signals from the financial market in order to gauge its near-term trend directions.
Crude Oil
Oil prices tumbled more than 3% on last Friday while closing the market at $55.10 per barrel. The commodity received a large selloff after OPEC production rose for the first time this year while Russia’s output levels missed its previously agreed production levels.
According to Reuters Survey, OPEC oil output in the month of August increased for the first time in 2019 by 80,000 barrels per day to a total of 29.61 million barrels per day. In addition, a separate report from Interfax reported that Russia’s production level increased to 11.3 million barrels per day in the month of August from 11.15 million for the previous month.
While both OPEC and Russia has agreed to extend its pact in June to reduce supply by 1.2 million barrels per day until March 2020, recent reports show a fallout in compliance level which sends off negative sentiment towards the oil market.
Likewise, oil futures remain in a downtrend for the recent weeks due to increasing trade tension in between US and China. New tariffs which were enacted has placed higher expectation of a slower economic growth ahead which may also lead to a lower demand of crude oil in the future.
Weekly Outlook: September 2 – 6
For the week ahead, investors will keep a close eye on important data such as Non-Farm Payroll that will be released this week to attain more market signals. Besides that, investors will also continue to focus on the development of trade talk between U.S and China.
As for oil traders, they will be eyeing on US inventories level reported by API and EIA to gauge the strength of crude demand for world’s largest oil consumer.
Highlighted economy data and events for the week: September 2 – 6
| Monday, September 2 |
Data CNY – Caixin Manufacturing PMI (Aug) EUR – German Manufacturing PMI (Aug) GBP – Manufacturing PMI (Aug)
Events N/A
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| Tuesday, September 3 |
Data AUD – Retail Sales (MoM) (Jul) AUD – RBA Interest Rate Decision (Sep) GBP – Construction PMI (Aug) USD – ISM Manufacturing PMI (Aug)
Events AUD – RBA Rate Statement
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| Wednesday, September 4 |
Data AUD – GDP (QoQ) (Q2) GBP – Composite PMI (Aug) GBP – Service PMI (Aug) CAD – BoC Interest Rate Decision
Events CAD – BoC Rate Statement
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Thursday, September 5 |
Data USD – ADP Nonfarm Employment Change (Aug) USD – ISM Non-Manufacturing PMI (Aug) CrudeOIL – Crude Oil Inventories
Events N/A
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Friday, September 6
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Data USD – Average Hourly Earnings (MoM) (Aug) USD – Nonfarm Payrolls (Aug) USD – Unemployment Rate (Aug) CAD – Employment Change (Aug) CAD – Ivey PMI (Aug)
Events N/A
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